Why Start-Ups Need Support Post-COVID19

In May 2020, the United Nations Capital Development Fund (UNCDF) compiled its findings on the impact of COVID-19 on Ugandan Small and Medium Enterprises (SMEs). The report indicated that only about 15 per cent of surveyed companies could sustain more than three months of operation on their cash flow at the time. The report further indicated that 85 per cent of all Ugandan businesses would be in financial distress after three months of lockdown measures while 50 per cent of informal businesses would be out of business or fall below the poverty line after just one month.

In the same year, The Innovation Village carried out a survey to find out the impact of COVID-19 on the SMEs within its ecosystem and made the following discoveries that it published in The Innovation Village Impact Report this year.

• Up to 79 per cent of the businesses that participated in the survey projected that their revenues would decrease in 2020 compared to 2019.
• Of those, 57 per cent indicated that their revenues would decrease by more than 25 per cent while 22 per cent projected their revenues would decrease by less than 25 per cent.

There is a general assumption COVID19 lockdown restrictions, limiting contact and movement created a fertile ground for the growth of start-ups working in Fintech. However, the Engagement Partner of the Financial Technologies Service Providers Association (FITSPA), Zianah Muddu, says that the flourishing of fintech has not been a given. This is due to the fact that even though other sectors are going digital, fintech support various sectors like tourism, education, e-commerce platforms and various kinds of trade. If other sectors are being affected, fintech still suffers the brunt since consumers barely have money to transact.

FITSPA, a non-profit association that aims to support Uganda’s vision to become a leading fintech destination is channelling an effort towards supporting the start-ups in the financial sector. To encourage start-up recovery and prevent the economic gap from widening due to COVID19, organisations are lobbying on behalf of start-ups for support in terms of contract financing and speaking to other organisations with relief packages like the COVID19 relief fund.

Muddu says feedback from fintech echo one common goal, that is, to “survive” the season. At this moment, FITSPA is harnessing the power of community care where they follow up on how fintech are coping, finding out their needs and then supporting them by seeking options on how to revamp their businesses to full operation. While FITSPA is doing work to support fintech, Start-Up Uganda is adding similar wood to the fire in the larger sector.

Start-Up Uganda is currently harnessing Innovation and Entrepreneurship Support Organizations (IESOs) to work together with its members to improve capacities, influence, impact, and create a more enabling environment for innovators and businesses that in turn will drive development across Uganda. Dona Sava, Project Coordinator at Start-Up Uganda says the lockdown has affected many start-ups gravely while for others it has only provided a launchpad. Sava points out that start-ups using digital platforms such as e-learning, e-payments, health tech, agritech and e-commerce to trade, have managed to grow their businesses, especially during this lockdown period.

With 30 IESO’s under their umbrella, Start-Up Uganda went into a partnership with The Innovation Village under the Mastercard Resilience and Recovery Programme (RRP). This is a fully-funded programme by the Mastercard Foundation to support the various start-ups to continue working despite the disruption. The support ranges from training to digital support, e-commerce platforms, and transport.

This is supplemented by providing investment platforms where they are able to pitch and find funding for their businesses. Depending on their needs, Sava says some start-ups are only looking for seed funding, while others are looking for funds to scale their businesses. To cater for this, Start-Up Uganda conducts activities like the Kampala Innovation week, innovation challenges and holds investor days where they have been able to provide these platforms for them.

As businesses go through yet another rough patch due to yet another lockdown, all across the board, there is need to contribute towards building the ecosystem and directing effort towards the survival of MSMEs in every sector. Once again, The Innovation Village is taking the lead in building resilience among entrepreneurs by working with them in cities across central, east, north and western regions of the country. The work involves providing support in form of funding, mentorship, skilling and digital markets to entities that are leveraging technology to solve critical problems in agriculture, health, education, tourism, media, supply chain, energy, finance and manufacturing.